A Sea of Trouble

With all the negative in the news lately, I decided to add a little "lightness" to your day in this blog. Not ALL of life is about economics and real estate......well... IT SHOULD BE.. but its not ENJOY

Great truths about life that adults have learned

Raising teen-agers is like nailing Jell-O to a tree.

There is always a lot to be thankful for, if you take the time to look. For

example, I'm sitting here thinking how nice it is that wrinkles don't hurt.

One reason to smile is that every seven minutes of every day, someone in an

aerobics class pulls a hamstring.

Car sickness is the feeling you get when the monthly payment is due.

The best way to keep kids at home is to make a pleasant atmosphere - and let

the air out of their tires.

Families are like fudge...mostly sweet, with a few nuts.

Today's mighty oak is just yesterday's nut that held its ground.

Middle age is when you choose your cereal for the fiber, not the toy.

My mind not only wanders; sometimes it leaves completely.

If you can remain calm, you just don't have all the facts.

New Year, New Opportunities

The new year 2011 will bring many new opportunities in Real Estate Investment. The pitfalls will be equal to the opportunities.

2010 will always be considered the bottom of the real estate market since the Great Depression. Not since the 1930's have we seen the same levels of depreciation of prices or the number of defaults and foreclosures. During the last quarter of 2010, a modest turn in the level of decline of values and the number of home sales has turned.

In the South Florida market, we have experienced the highest level of closed sales in the last 4 years starting in July of this last year. While prices have dipped on average by 45-60%, depending upon location, the number of sales has jumped over 120% over last years levels. That has virtually stopped the slide in values and in some cases has led to some bidding wars among investors on the best deals. Short Sales and Foreclosure sales still outnumber the resales in the market but this number is quickly declining.

Pressure on interest rates and the weakening dollar are putting people back into the market as well to grab the best mortgage deals before they are gone. AND they WILL be gone within 18 months at the outside. It is inevitable. The fox is already in the coop. The fox is the massive dollar printing that took place in the last 20 months by the Federal reserve and there is no pulling that back in. Those dollars are in the market place and at some point, will come home to wage an inflation war on the US. Be prepared.

Real Estate and commodities, especially those pegged in US currency will be a good hedge against the devaluing of your cash position. But debt will not be your friend by any stretch if you are holding short term adjustable interest debt. You are sitting on a time bomb that you MUST get rid of or be seriously hurt. Dont ignore this warning. It will be to your peril.

WHICH WAY AMERICA?

Its not often that I talk about politics in this blog. Real Estate investment strategies are the core of the discussion here. However, 27 days from now, Americans will go to the polls. And in this election, I cannot think of another moment in my lifetime where the people of this country have a clearer choice. It is a choice that will determine what kind of country and what lifestyle my children and grandchildren will live in.

I am firmly convinced that there are forces at work to destroy the "American Experiment" that was based on limited government, self reliance, self initiative and the belief that as Jefferson said, "THE GOVERNMENT THAT GOVERNS LEAST GOVERNS BEST" In the last 18 months, a larger percentage of our national GNP has been nationalized by the federal government than has been nationalized by Marxist Hugo Chavez in Venevuela in the last 8 years! That is truly frightening.

The government has printed almost three times the amount of money that was in total circulaton just 2 years ago to buy our own debt with our own FUNNY MONEY. The ONLY reason that inflation has not taken over like a wild fire is that so many Americans are under water in their mortgages. That means they have no credit to go out and spend. Corporations are holding over 1.6 trillion in cash reserves and are not investing in new plant and hires because of the uncertainty of what new regulations or taxes this out of control government will do next. BANKS are hold reserves of over 1.8 trillion but are not lending.

But when the moment comes in the psychology of the nation that makes people feel they better spend it or lose it.....WATCH OUT! It will hit us like a train in the night and there will be no stopping it. There is NO EXIT PLAN by the FED in printing all this cash and all they have done is to delay the pain so that it is MUCH WORSE later on.

Invest? Gold, Coal, Euro Bonds, and seriously devalued real estate that is income producing are your best bets for the future. I believe that real estate values will sink another 20% unless the foreclosure and credit markets resolve. LENDING is the key to real estate sales and LENDING is locked up. If you are an all cash buyer, you are in luck. There are tremendous deals out there that I believe will see great gains as inflation takes over. Stocks? NO WAY... inflation will kill recovery and joblessness will rise affecting any consumer related corporation. But, everyone needs a place to live. Many who own now... will be RENTING in the future.

Real Estate and Ethics DO Mix

LETS TALK ABOUT RIGHT AND WRONG.......
Most people dont want to talk about the subject of what is right and wrong in this day and age of "situational ethics" translate.. "I dont HAVE and ethics....",

So what does that have to do with Real Estate, Specifically it has to do with the melt down in the Real Estate Markets and the correpsonding meltdown in the Financial markets. The core cause of which is the meltdown in the ethics of INDIVIDUALS making UNethical business decisions. AND, YOU may be one of them. Dont think so? Read on.

Not all, but SOME, Wall Street, Main Street and the Mortgage Lending offices along with the Real Estate office and the Brokers that run them. There is a Commandment in THE Ten commandments that is oftren overlooked. We like to focus in on...murder.....adultery......idol worship....and all the "really bad stuff". But there is one fatal sin that is equal to them all.. COVETING. It manifests itself in people wanting more than they can afford, more than they are due and the jealousy that today we like to call... " SOCIAL JUSTICE" . Because Bill and Mary Sue have a big house., then I AM OWED a big house too. Never mind that Im a complete idiot and cant even remember to make the Newspaper payment on time.

Our all knowing and ALL wise government ORDERED Frannie Mae and Freddie Mac to make honme owernership the RIGHT of ALL Americans. Never mind that SOME Americans cant hold down a job, pay thier bills on time and would rather light up than clock in. But that doesnt matter. What Americans covet.. they MUST have and the Banks and brokers hungry for commissions were more than willing to step up to the plate with exotic derivatives and financing schemes that not even a super computer at the NSA could figure out.

Its all about PRIDE and wanting to be and have something that you are NOT. Its also the good book that says.. PRIDE goes before a FALL. And BOY aint it so!

CHAPTER TWO OF THE FALL.....
In comes that all knowing ALL helping hand of government ( looking for votes) to let people step away from their commitments and contracts and DEFAULT on thier mortgages simply because the game changed and the investment that they had BIG EYES for isnt so big anymore. Never mind that someone else bought thier commitment and depends on them making that payment. You have enough people that skip out on their contractural commitments and the entire financial system goes into free fall. IN COMES THE government again.. This time we call it a BAIL OUT.. Compliments of the Chinese government and funny money printed somewhere in a dark basement of the Federal Reserve in Washington D.C. This year 1.8 trillion of those dollars to be exact. If I were Chinese I would be worried that the 2.7 trillion in US Treasury notes that I have purchased will only be good for papering the bathrooms of about a billion screaming red hot mad Chinamen when they find out that the US notes they are holding are about as valuable as a roll of USED Charmin.toilet paper. And sadly.. its true.

I recently counseled a young man that was upside down in his mortgage to stick it out and not to fall into the trap that so many have. He was advised by an attorney to default on his mortgage in the hopes that the bank would work with him on a Loan Modification. After ruining his good credit, the bank has yet to offer him a toaster or a nifty bank calendar much less a loan modification.

POINT? Im going to type this in BIG letters for those of you that have half your brain tied behind your back..... IF YOU CAN PAY THE MORTGAGE ON YOUR HOME...PAY IT.. DO THE RIGHT THING AND EXPECT RIGHT THINGS TO COME BACK TO YOU. Just because the commitment you made earlier is not working out as your planned does not release you from your ethical obligation to be a man....or woman of your word. Honoring your word is more important than keeping home equity. Are you an honest person ONLY when it doesnt cost you money?

Case in point..... Man walks up to cute girl and asks her. If I give you a Million dollars will you sleep with me? She says, Are you serious? A million dollars? Wow,, I guess so. Sure. He then says.. Ok how about ten bucks. She says.. HEY! What do you take me for? He says.. We already established that. Im just trying to get to a price.

Not to toot my horn, but I have a condo on the beach in South Florida that I paid $360,000 for. Its now worth about $250,000 The Loan is $270,000 I have faithfully made the payments. In fact, I havent even applied for a Loan Modifcation. Bottom line, Chase bank in the last three months, modified my loan by reducing my principle by $110,000 and dropped my interest rate to 4.8 percent on a 15 year amortization. It dropped my payments by $900 a month. It DOES pay to do the right thing. And WHY did they give me the modificaiton? THIER answer. CLEAN credit, High FICO score, Never late on a payment, LOW risk for the bank. END OF BLOG...ENOUGH SAID

CONGRESS GO HOME!

Business needs STABILITY and a constant and level playing field plus rules to flourish. If anything, the current REGIME in power in Washington has all the business experience and expertise of my 5 year old Shiz Tsu. At least my dog understands the concept of performance equals REWARD... A CAPITALIST idea by the way.

The only way that this economy and the Real Estate industry that is ESSENTIAL to the recovery, will recover is if Congress will adjourn for..... oh lets say.... TWO YEARS. NO laws would be preferable to the lunacy of laws that have been enacted into law in the last 18 months.

Is this about a political party? No. Is this about a candidate? No! Its about common sense and the correct decisions that must be made to make America the business capitol of the world. How is it that the Chinese of all people.. Yeah,, the COMMUNIST Chinese, are eating our lunch right now. Because they tried what we are now trying for 50 years and the people ended up living on dirt floors and choking to death on dirty factory smoke making shovels for the masses that no body needed. ( Central Planning) Now you go to China and it looks like Times Square plus 100 on a great shopping day.. Amazing wealth generation and capital accumulation..

Here is how it works.

1) Make more than you spend
2) Dont spend more than you make
3) People must WORK to have want they want,, no free rides
4) Plan for the future,, not for tomorrow
5) Strong Families , moral codes of conduct in society that are strictly enforced.

Now,, do I want to live in as Fascist State like China? No. And make no mistake. China is no more "communist" than my Shiz Tsu is a Kensian Economist.... It is a fascist state.

But there are things we must learn and learn fast, if it is not already to late. STOP THE SPENDING.... Reign in government and regulation. FREE the market.

And oh yeah,, do that,, and watch your home values start to rise, foreclosures fall off and construction begin again.

America has always been a land that is about FREEDOM. Free Enterprise is just that. And if you over regulate and over tax and actually VILIFY private enterprise.. It WILL go elsewhere. AND,, it is. This administration has pulled the welcome mat out for business both foreign and domestic to continue to do business here. And seriously, would YOU want to invest your money in this country right now with a government in power, that is intent on raising taxes at every level, requiring your company to provide every increasingly expensive benefits to employees,,even PART TIME employees. Taxing everying from internet sales to proposing taxing THE AIR in the Cap and Trade bill the President is set on passing.

Someone needs to steal the car keys of all the elected officials in D.C. and change the locks on the offices. SOMEONE put something in the Kool Aid and THEY DRANK IT!

TO DEFAULT OR NOT TO DEFAULT....THAT IS THE QUESTION

Underwater Homeowners are considering the NUCLEAR OPTION in dealing with the housing bubble crises that continues across the nation and here in South Florida.

Some owners are asking the question, " Why keep putting money into a house or condeo thats going down in value? This is a question that is being debated in many households.

Let me shed some LIGHT on the subject. Why should you keep paying that mortgage?

(1) A Moral Obligation to do so.

Even though walking away from a mortgage could be a temporary good "business" decsion, one must weigh the moral considerations. You signed a contract with another person or party that gave you money that DID NOT BELONG TO YOU, with the promise of you paying it back. Just because that decision is no longer making you more equity is still not a right or morally correct decision to walk away from that contract. When you do walk away, you are leaving those people holding YOUR bag. Fair? No. Hard to justify? YES Remember that you are teaching by doing to your children and those that watch YOUR business ethics and actions. What may seem like an easy out today, WILL at some point catch up with you.

(2) The Lender is likely to collect

Borrowers have to weigh the practical considerations of so called strategic default, They risk being sued by the lender for theunpaid mortgage balance for up to 20 years!

(3) Destruction of your Credit

Those that default on mortgages suffer huge hits to thier credit rating. It will make it difficult, if not impossible to get car loans, credit cards, store credit or good car insurance rates. It can also affect FUTURE employment years down the road when a potential employer pulls your credit history and sees your default. Those that take this option see credit scores drop by 200-300 points. These defaults will stay on your record for at least 10 years. and you will be unable to get another mortgage for at least three years.

(4) IRS Liability

Remember that GREEDY and BROKE Uncle Sam will come looking for you. If lenders forgive the mortgage debt, borrowers who walk away will be required to pay income tax on the forgiven amount!!!

The bottom line to all of this is that a mortgage is a contract that your signed agreeing to pay the money back. If you break that contract a house of cards will fall on you big time. There is NO EASY OUT. Some say that the banks deserve it and that they are the ones that caused this entire mess. Thats only partially true. Lets remember who caused this.

1) The politicians that YOU elected and continue to hold unaccountable for wild speculative borrowing practices FORCED on the banks and lenders so that people who had NO CREDIT and no history of sound financial management could own a home.

2) The loan YOU signed for and possibly fudged on your application to get that loan.

3) The fact that YOU had eyes bigger than your stomach in wanting more than you could afford

4) The fact that YOU ran with the crowd believing that the housing prices would continue to skyrocket and make YOU lots of money...And now that REALITY has set in,.... you blame someone else or a bank for your poor money decision. Own up, straighten up, Shut up.. AND PAY UP!